[2015] KEHC 2886 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT KISUMU

MISC. CIVIL APPLICATION (JR) NO. 2 OF 2015

IN THE MATTER OF THE CO-OPERATIVE SOCIETIES ACT (CAP 490)

AND

IN THE MATTER OF THE COUNTY CO-OPERATIVE OFFICER-KISUMU

THE SUB-COUNTY CO-OPERATIVE OFFICER-KISUMU

AND

IN THE MATTER OF AN APPLICATION FOR LEAVE FOR ORDERS JUDICIAL

REVIEW IN THE NATURE OF CERTIORARY AND PROHIBITION

BETWEEN

REPUBLIC …....................................................................................................... APPLICANT

VERSUS

COUNTY CO-OPERATIVE OFFICER – KISUMU…….. 1ST DEFENDANT/RESPONDENT

SUB-COUNTY CO-OPERATIVE OFFICER-KISUMU... 2ND DEFENDANT/RESPONDENT

ATTORNEY GENERAL …............................................... 3RD DEFENDANT/RESPONDENT

AND

MEK SACCO …............................................................................... EX-PARTE APPLICANT

RULING

On 16th March 2015 the Sub-county Co-operative Officer Kisumu East/Central ordered the stoppage of all transactions in the MEK Sacco Limited accounts held at the Co-operative Bank Kisumu Branch and Family Bank Kisumu, more specifically Account numbers 01120012350701, 01120012350702 – Co-operative Bank and Account No. 02500002149 Family Bank pending or ''until the inspection report will have been read to the members.'' Being aggrieved the MEK Sacco Limited sought and obtained leave to institute judicial review proceedings quashing the decision of the said officer. By a Notice of Motion dated 15th May 2015 the Sacco now seeks an order to be allowed to operate the bank accounts pending the hearing and determination of the substantive motion.

The gist of the application is that respondents acted without jurisdiction as the law does not allow them to close the account; that the applicant has a good case with a very high chance of success; that if the prayers are not granted the applicant shall suffer irreparable loss, and further that the orders were made without giving the applicant an opportunity to be heard and are oppressive and not based on any law.

That application is supported by the affidavit of Simon Otieno the Chief Executive Officer of the ex-parte applicant.

The application was opposed by the 1st and 2nd Respondents through the affidavit of Zephaniah Osok the County Co-operative Officer Kisumu in which he deposes inter alia that the action taken was in furtherance of a resolution of the members of the Sacco (Ex-parte applicant) at a Special General Meeting held on 14th March 2015, following allegations of embezzlement of funds at the Sacco.

The application was canvassed by way of written submissions. In summary counsel for the Ex-parte applicant submitted that the Respondents have no powers under the Co-operative Societies Act or even rules to stop the operation of the bank accounts and as such they acted without jurisdiction. That the powers of the Commissioner of Co-operatives are under Section 58(4) Limited to dissolving the committee and causing to be appointed an interim committee for a period not exceeding ninety days. That moreover the Supervisory Committee has no powers at all to call a general meeting as it is only the Central Management Committee that has power to do so. He further submitted that as a result of the illegal conduct the members of the ex-parte applicant are not able to access loans to enable them to feed their children and the loans advanced by the said banks are accruing and attracting interest, the ex-parte applicant cannot pay its staff and its business has been completely paralyzed. He contends that unless the interim orders are granted the ex-parte applicant shall continue to suffer irreparable loss and damage.

On his part Mr. Onsongo Advocate for the 1st and 2nd Respondent has submitted that the orders sought herein are in the form of a mandatory injunction which seeks to undo what has already been done. Relying on Bahadurali Ebrahim Shamji V. Al Noor Jamal & 2 Others [1998] eKLRhe submitted that it is a requirement that anyone seeking injunctive orders must make full disclosure of all material facts or be disentitled to the orders sought and that in this case the ex-parte applicant failed to disclose that the freezing of its accounts was a result of:-

a) Issues raised by members and the Supervisory Committee of alleged embezzlement of the MEK Sacco funds.

b) a resolution by members in a Special General Meeting held on 14th March 2015.

He contended that the effect of the orders sought would be to allow the accounts to be operated notwithstanding the hue and cry by a section of the membership; that the persons complained against would continue to operate the accounts notwithstanding the resolution of the members and lastly that the Court shall descend into the arena of the affairs and operations of MEK Sacco effectively shutting out the members. Outlining the powers of the Commissioner at Section 58 of the Act he emphasized that the Commissioner has been mandated to report the findings of his inquiry at a general meeting of the society and to give directions for the implementation of the recommendations of the inquiry report. He contended that bases on this section the ex-part applicant should seek to have the 1st and 2nd Respondents convene a general meeting at which the report shall be tabled. He further contended that the order sought if granted shall be against public policy. He urged this Court to dismiss this application with costs to the Respondents and allow them to comply with Section 58(3) of the Co-operative Societies Act

The Court is here only concerned with the decision to stop the operation of the ex-parte applicant's accounts at the two named Banks and the issue for determination really is whether the 1st and 2nd Respondent have power to order such stoppage. I have considered the grounds for the application, the affidavit in support and in reply and the able submissions of the Learned Advocates for the parties. I have also perused the Co-operative Societies Act and Rules and come to the conclusion that the

Respondents acted without jurisdiction in ordering the stoppage of the transactions in the accounts. It is not in doubt that the Commissioner of Co-operatives and by extension the 1st and 2nd Respondents have wide powers under Section 58 of the Act. Those powers include the giving of directions for the implementation of the recommendations of the inquiry report. It is however instructive that there is yet a report on the inquiry ordered in this matter. Further whereas the Commissioner also has power under Rule 51 of the Co-operative Societies Rules to suspend operations of a deposit accepting Co-operative Society that power is limited to a period not exceeding thirty days. Even then the Sacco must be given a hearing before such an order is made. However those are not the powers that the 1st and 2nd Respondents purport to have exercised. It is deposed in the replying affidavit a fact which was reiterated by the learned counsel for the Respondents, that the decision to stop operation of the accounts was in furtherance of a resolution of the members of the co-operative Society at the Special General Meeting. The notice for the said meeting is dated 20/2/2015 – annexture ''SO13'' to the replying affidavit – and is signed by the chairman and the secretary Supervisory Committee. A closer look at the Act will show that these two ''officers'' had not power to call the meeting. Section 27 (6) of the Act reserves that power to the Management Committee. Under sub-section (8) the Commissioner may also convene such a meeting. Section 27(6)(b) provides that such number of members as may be prescribed may requisition for such a meeting by a written notice stating the objects and reasons for calling the meeting and should the committee fail to convene the meeting within fifteen days of receiving the meeting such members may themselves convene the meeting.

It has not been demonstrated that such was the case here. The duties of the Supervisory Committee as set out in Rule 28(3) of the Co-operative Societies Rules shall include:-

a) verification of all transactions of the Society.

b) writing periodic reports of its findings to be tabled at Management Committee Meetings.

c) submission of its reports to the Commissioner.

d) presenting its report to the general meeting

Rule 28(4) expressly prohibits the supervisory Committee from performing the duties or exercising any of the powers of the committee of the society. In my view that would include the power to convene a special general meeting and clearly therefore the meeting held on 14th March 2015 was held unlawfully and could not have legitimately given rise to the action taken by the 1st and 2nd Respondent. To say so would be to uphold the rule of law which even the 1st and 2nd Respondent should have been careful to do, but would not amount to descending into the management of the affairs of the ex-parte applicant. This application is accordingly allowed but with an order that the costs of the application shall be in the cause.

Signed, dated and delivered this 2nd day of July 2015

E. N. MAINA

JUDGE

In the presence of:-

Mr. Onsongo for 1st and 2nd Respondents

CC: Moses Okumu

N/A for ex-parte Applicant